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Your System Is Ready For Reverse Logistics

Thu, 11/08/2012 - 1:46pm
Dylan Persaud, Managing Director, Eval-Source

Software is capable of many functions. But is your organization using its system efficiently?  This article will illustrate how companies are ill prepared for reverse logistics throughout their supply chain and retail product recalls.

The reverse business processes for organizations when recalling products are often poorly executed or do not exist at all. The gap between the data stored by the enterprise business system software and interpretation of that data can be easily aggregated to identify the defective units. Today’s ERP systems have outpaced the organizational readiness for product recalls. Luckily, with QA standards being what they are today, this is a rare occasion. However, organizations should have a contingency plan to recall defective skus and products -- especially those that enter the supply chain.

Now that your organization has delivered the product to customers, what happens when there is the need for a product recall? Does your company have the correct business processes in place if a product recall is needed? Does the organization have correct and detailed procedural practices in places to identify where it is in the supply chain, to what stores it went, and to whom was the product distributed? While many systems such as groceries will track the exact consumer that bought the product, it will be able to ascertain which stores and locations the products were distributed to before it hits the end-user within the supply chain.

For example, we will examine a component for an automotive assembly. This assembly consists of several components from various suppliers. These components will be assembled into a certain model of car for a particular model year as part of the entire finished component. Let’s say that the assembly is a dashboard, with a faulty wiring harness for the radio that may cause fire. The car is now complete and some were delivered to customers while some reside at car dealerships.

If your job was to recall these defective automobiles with the faulty dashboard assembly, where would you begin? Let’s start by examining what components are in the dashboard assembly.  There is the molded plastic shell, in which components of the radio, odometer, tachometer, gas gauges, vent cut-outs, and various electronics are contained. The software system you have in place can actually identify the faulty wiring component, the part number, lot number of the harness, the supplier and the date of the manufacturer, and the serial number for the radio. How does your organization start the recall to reverse the logistics processes that distributed the parts in the first place? Is there a process to identify where the current defective parts are located? Is there a difference if the faulty dash is at dealer or if a consumer has it? How will the recall notices be sent out and tracked? How is the repair monitored? These are just some of the questions the manufacturer must answer if a recall is in order.

With all the recent automotive recalls, these companies have learned that it is not that their systems are deficient but are there business processes in order to comply with the system integrity?  Now that the stage is set for the correct information at your fingertips to recall the defective units, is your company prepared to handle a recall? Experience from botched recall has proven ineffective logistical processes by organizations (which causes excess losses to the bottom line).

The data available in today’s systems must be able to be interpreted correctly, and the corresponding business processes that can be designed from the aggregated data need to be formulated. The business processes must not only exist but also be optimized to reduce loss.  The gap that organizations often face is that their method to recall products through their supply chains down to retail levels are often not complete and not executed properly. These incomplete processes lead to even more shareholder loss.
The execution of fragmented and incomplete processes often multiplies headaches for manufacturers. These processes can quickly magnify if suppliers are global where quality standards are not often adhered to. Further problems due to lack of visibility from foreign suppliers through the supply chain can continue to occur if goods are in transit and/or are already in process of being manufactured for future demand fulfillment.

Organizations must find a way to interpret the data they already own, bridge their deficient business processes, and follow up with proper execution. Organizations need to build their business processes to leverage the already existing data that the systems already provide. Organizations should not only have these processes in place, but they should able to execute on how they are performed and tracked.  This contingency will minimize losses and increase customer satisfaction by accommodating the customer and building brand recognition.

Furthermore, they must control the execution of those processes and make sure that the plans they have made for their reverse logistics process can coincide with the available data from their systems. Having a process in place is one thing, but being able to execute the process effectively without much deviation and efficiency can make the difference on how well you perform a recall or how much money your company loses.  This is a case of not the technology failing, but the people-centric processes failing.

A recent case in Canada where a large meat plant was closed down due to e coli bacteria entered the supply chain through beef products the recall was handled atrociously by the government.  The actions in which were executed by the federal government proved inept and questions have surfaced to the ineffectiveness of the entire system of alerting consumers.  Every component of the system has come under scrutiny as to how many inspectors were involved for inspections, whose responsibility it was to inform the public, and a comedy of errors that multiplied down the chain compounding the problem. This again proved the human process and execution side failed, not the systems that were able to track where the product ended up.   

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